Back in 1980, the average annual cost for a 4-year public institution was $3,499. For a 4-year private college, it was $5,594. Fast forward to the 2010-2011 year, and those costs reached $15,918 and $32,617. That’s an increase of 355% and 483%!

What gives?

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Why CPI Matters

Here’s a tiny economics lesson. If you annually track the overall price of things you buy (consumer products), you’ll effectively have the consumer price index or CPI. CPI is a pretty good representation of inflation—how much you can buy with your money.

If you compare the CPI over the last 30 years with the average cost of college, like in the graph on the right from Mother Jones, you may notice something. Namely, the cost of college is growing faster than the average of all the other things we buy every year: food, clothing, coffee, etc.

Where’s The Increase Coming From?

So, if inflation isn’t the real culprit for increasing the cost of college by that much, what is?

By looking at income and spending from 2,000 colleges since 1995, we see that the biggest reason for rising college costs in the 2000s is the reduction in state dollars given to universities—a decrease of almost 18% since 2002. Colleges needed to make up for that lack of funding somewhere (you can probably guess how they did it).

In addition, spending on student services has increased annually since at least 1995. At the same time, administrative and maintenance costs have also increased colleges’ spending. Since 1995, public institutions increased their spending on these costs by 13%.

Another spending culprit is dorm rooms. Residence halls have come a long way in the last 30 years. Schools are phasing out tiny square rooms with cookie-cutter furniture and few of the comforts from home for lavish, apartment-style living. Just remember that these updated dorms come with a big price tag that gets passed on to you.

The Real Competition

Looking at the graph, you might think that colleges are greedy, but that’s not the whole story. College admission is not just a competition for you to get in. It’s also a competition between colleges for you to enroll. Colleges wouldn’t exist if it weren’t for you, and you’re more likely to enroll in the better “college experience.”

The “college experience” is what makes you want to enroll in that school—whether it’s the awesome professors, the new equipment, the comfy dorm rooms, or the activities that will make your time a blast. These come with a large price tag, and colleges are continually investing in them so they stand out from the pack.

Would you really want to go to a school with mediocre professors or antiquated equipment? That’s why colleges keep spending money and increasing their costs. When you factor in the decrease in state funding, it just gets more and more expensive.

I’m not saying that you’re on your way to jail if you don’t go to college, but college can open doors that may otherwise be shut. Is it expensive? Yes, but there are ways to cut the costs. Don’t forget about scholarships, student loans, and comparative shopping when deciding on colleges.

How have you dealt with rising college costs? Share your story in the comments.

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Leave A Reply

NotBuyingItAugust 28, 2014 / 6:22 pm

I don’t think it is fair to decide that nicer residence hall rooms are one of the main contributing factors in tuition increases. We already pay for having nicer rooms; it is a separate charge called “room and board”.
And the statistic about making more money out of college is nice in theory, but no point is made about the amount of college graduates who are actually hired straight out of college.
The decrease in state funding would be a valid point, except for the fact that states are deciding to give less money to universities, yet not keeping pace with the increasing costs in terms of aid given to students. All in all, I’m not convinced that accurate reasoning has been given for the rising costs.

^Agreed. It just doesn’t make sense. I think it’s just greed from higher ups and upgrades in technology (colleges want to have the most up to date software, so students are definitely going to pay for it)

That makes me kind of understand how they come up with the price tag. However some colleges are very expensive and they don’t have the faculty to back up that price tag. I have spoken to reasonably priced colleges where the faculty treated me with genuine respect and I could sense they wanted me to be successful. I have also talked to schools that were very pricey with all the bells and whistles that treated me like I was Student 806 and they couldn’t care less. I am going to school for graphic design and it was really difficult for me to find a school that was affordable with the little financial aid I was receiving. Pretty soon people won’t be able to go to college because no one will be able to afford it.

Thanks for the link! There are many thoughts on this subject and I won’t pretend to have all the answers but the Congressional Research Service released a report last month on this topic. (http://c.ymcdn.com/sites/www.ncher.us/resource/collection/1CFB07FA-74C6-4F0A-8E79-3ADB2C453546/R43692.pdf) On page 32 they get down to the final conclusion that there is inconclusive evidence that increased federal aid increases the cost of college. It pulls together many studies on the subject conducted in different ways. You might find it interesting anyway.

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